Conversation between Rahul Gandhi (RG) and Raghuram Rajan (RR). Transcribed from the link of Rahul Gandhi facebook page https://www.facebook.com/rahulgandhi/videos/1145504059135540/
Transcribed by Charul Gupta
The Sabha intern
RG:Hello.
RR: Good morning. How are you?
RG:Nice to see you.
RR:Likewise likewise.
RG:You know, there’s there’s quite a lot of Questions in people’s minds about what’s going on and what is going to happen with this virus and in particular with our economy and I thought interesting way to answer some of those questions for myself and for some of those people would be to have a conversation with you and get a sense of what you’re thinking.
RR:Thanks for having me and thanks for opening this conversation. I think it’s very important. These times to have as much information on these issues as one can get and for the public to be as informed as possible.
RG:One of the big issues that I have and one of the things I’m thinking about is how we should think about opening up the economy, which of the parts you think of the economy that are critical to be opened up. And what’s the sequence of opening up?
RR: It’s a great question because I think as we turn from trying to bend the curve on infections and prevent hospitals and medical facilities from being overwhelmed, we have to start thinking about restarting people’s livelihoods. It’s all too easy to have a lockdown forever. But obviously it is unsustainable for the economy. So it has to be a sequencing first where you can maintain distance again, it’s not just distancing in the workplace. It’s also distancing to and fro from the workplace and transportation structure. You people have means of transport, the Cycles, then there are the scooters or even cars or do they depend on public transport? And if it’s public transport, how do you maintain distance in public transport? So there’s a lot of work that needs to be done both on creating the structures as well as ensuring distance at the workplace. If there are fresh cases, how do I isolate quickly without having to go to a second lockdown or a third lock down.
RG:That’s what a lot of people say that if you get into a cyclical lockdown, if you open up and then you’re forced to shut down. Then you open up if you’re forced to shut down again. Then that is devastating for economic activity because it would completely destroy trust. Would you agree with that?
RR: I think that’s right because that would suggest, you know, take even a second lockdown. It means that you haven’t been completely successful. So that raises questions if you reopen again, will you go into a third lockdown. So it does diminish credibility. I don’t think we have to aim for a hundred percent sort of success that is zero cases when we open up, that’s unachievable. What we have to do is to manage the reopening so that if there are cases, we isolate them.
RG: But at the heart of that management, you know knowing which areas are having heavy infections, which areas are not at the heart of that process of course is testing and there’s a sense in India and that the testing capability is in itself limited. That we were a big country and that our ability to test like, you know, the United States or like the European countries is comparatively limited. So, how would you think about it with a sort of low level of testing?
RR: I think in the United States right now, it is rammed up to about a hundred and fifty thousand tests per day, but the consensus amongst experts certainly the epidemiologists is that to really be confident about opening up, you have to Triple that to 500,000 tests a day at least and some are talking of numbers in the millions. Well, I mean just multiply by 4 to get a 4 and a half to get India’s population and you’re talking about two million tests a day. If you want to get the level of confidence that you have in the United States then clearly we are nowhere near. I think we’re somewhere around 25 to 30,000 test per day at this point, but we have to be clever about opening up which means perhaps do mass testing. Take a thousand samples and then check in a mass way whether there are any signs of the virus in those thousand samples. And if you do find that then go deeper into that particular sample and check who it might be. These are ways of testing which reduce the burden on the test. Sure, we can try and get much more. It’s in some sense less intensive but it is clever. We have to be clever about the reopening because we simply can’t wait till we have that kind of facility.
RG:There is going to be the impact of the virus. And then after some time there is going to be the impact on the economy. It is going to come a couple months from now. How do you make the balance between fighting the virus right now and fighting the consequences of the virus three or four months down the line?
RR:I think there has to be a prioritization because our capacities and our resources are limited. Certainly our financial fiscal resources are more limited than the West. So what we need to do is to decide how we keep this economy together. So most immediately I think keep people well and alive. Food is extremely important. Reach it to every place. Places where the public distribution system does not go. To people with temporary coupons, for example for people who don’t have access to ration card. But you know, you have to treat this pandemic as a situation which is unprecedented. We have to break norms in order to tackle it. What is needed while at the same time keeping in mind that there’s an overall budget, a sort of limitation. There are only so many resources we have.
RG: What do you think about the agricultural sector and the workers, migrant workers? How should we be thinking about their finances?
RR:Well, this is where I think the efforts we made on Direct benefits transfers sort of needs to be realized at this point. All the ways we can transfer to relatively poor people, we need to make a call on that. You know, we have different ways of accessing widow’s pensions through the MNREGA route and we need to say look these are who don’t have a job right now, who don’t have a livelihood and for the next three or four months there is uncertainty, and so we’re going to support them. But in terms of the sort of priority keeping people alive and keeping them from having to go onto the street, you know in protest or looking for work is probably useful at a time of lockdown. And so I think we need to find ways of getting both money as well as food through the public distribution system.
RG:So how much money will be spent to help the poor?
RR: Around 65000 crores and 65000 crores is not so much. Our GDP is 200 lakh crores and in that 65 thousand crores is not so much, and if it is for the poor and if it saves their lives, it has to be done.
RG:But after covid, India will get any benefit from this event? There will be any changes in the world that will benefit India. And that India could take advantage of the change in the world?
RR:You know, these kinds of incidents rarely have positive effects for any country, you know in general, but there are ways countries can take advantage of them and what I think we can say is that they will have to be a rethinking of everything in the global economy. Once we are out of this if there is opportunity for India, it is in shaping that dialogue in being more of a leader in that dialogue because it is not one of the two big warring parties but is a big enough country to be heard of its voice, to have its voice heard in the global economy in this situation. India can find opportunities for its industry for its Supply chains, but most importantly it can try and move the dialogue towards one which has greater place for more countries in the present global order, towards a multipolar order rather than a single or bipolar Global Order.
RG:Don’t you think there’s a crisis of centralization? That there is too much centralization of power taking place and in the conversations are stopping. I mean, I think conversation would help a lot of these problems that you’re talking about.
RR: I do believe that decentralization is important. And both for bringing more local information to work something we talked about earlier but also about giving empowerment to the people. What you see across the world is a great sense of disempowerment. Decisions are being made elsewhere not by me. I have a vote but that elects somebody in a far-off place, my local sort of panchayat or state government.
With Less power they don’t feel they can do anything and so they become prey to a different set of forces. I would ask you the same question. I mean, do you see this whole panchayati raj which Rajiv Gandhi your Father brought back. What effect has that had and has that been beneficial?
RG:It’s had a huge effect, but I’m sorry to say it’s in Retreat. So a lot of the forward movement on panchayati Raj has taken place. We are now moving back to a sort of bureaucratic DM based structure or a bureaucratic way of structure. And if you look at the southern states, they are doing a better job because they are actually more decentralized and the Northern States are centralizing power and they’re taking away power from the panchayats.
RR:Closer decisions are taken to people the more ability. They have to keep a check on those decisions. So I think it’s an experiment we’re doing.
RG:But what do you think is causing this at a global level? Why do you think we are having this sort of massive centralization and stopping a conversation?What do you think as a central cause of you think there are a number of
RR:I do think there is a cause and I think it is the global markets right? There is a sense that if markets get globalized then the market participants firms, for example want to see the same rules everywhere. They want to see the same coordinating structure everywhere. They want to see the same.Because that gives them confidence. And this uniformity takes away power from the sort of local or national governments. Of course, in addition there is the bureaucratic temptation to centralize. If I can grab the power why not? And so that is a constant desire to, you know, if you’re providing funding to the states here are the rules that you must obey in order to get this. If not, I will not give you this funding. No questions asked because I know you’ve also been elected and you will have to have a sense of what is appropriate for you.
RG: There is a new model which is out, which is an authoritarian model. Which is questioning the sort of liberal model.It says it is a different way of doing work and it seems to be rising in more and more places.Is it going to be pushed back?
RR: I don’t think so. I mean the central authoritarian model is based on a strong figure. In a world where you are powerless, is sometimes very appealing. If you develop personal rapport with that figure therefore you believe that they believe in me, they care for the people. The problem with that the authoritarian figure can develop their own sort of sense of yes I am the power of people. Therefore what I say, my rules apply not the checks and balances not the institution not the decentralized structure. Everything will be controlled from me. So historically what happened is there has been too much weight on the centre and eventually it collapses.
RG: But there is something wrong with the global economic system. It is very much clear, Would it be a fair statement?
RR: I think it is a fair statement that is not working for a lot of people. The growing inequality of incomes and wealth in developed countries is the source of concern. The precariousness of jobs, the so-called precariat, is another source of concern. You have big jobs without any sense that you will have income tomorrow. Because you have seen in the pandemic that many of these people don’t have any support.They have lost out on their incomes and their safety nets. Therefore what we have today is a slowing of growth, we cannot go away with the growth, we do need growth but we also have the problem of stuck, inadequate distribution. People are getting the fruits of that growth, and also many people are being left out. So we have to think on both sides. So I think rather than distributing the output, distribute opportunity.
RG: It is interesting that you said that infrastructure connects people and that gives opportunity. But if there is division and hatred that disconnects people. That is also infrastructure. This infrastructure of hate creates a bigger problem.
RR. I think social harmony is a public good. Having everybody believe that they are part of the system, equal part of the system is essential. We cannot afford to have our house divided, especially now when challenges are so big. Our founding fathers people who wrote our constitution, and the early administration I have spent some time sort of relearning. And. those people realised that we have to put some issues on the shelf and not touch, because if we get into those issues, we will spend more time fighting each other.
RG: Also, you tend to look into history, when you are struggling with forward vision. I like the idea of what you said, India needs a New Vision. What will be the elements of that? You mention infrastructure, education, health care but how will we be different from the last 30 years or 20 years. What will be the pillars that will be different?
RR: I think that on one hand we should be creating elements of capability that is when we talk about education, infrastructure. Also when we talk about creating capabilities we have to walk the talk. we also need to rethink what the industrial and market system looks like. we still have reminiscence of old licence permit Raj.And we need to figure out how we go to a place where the asset is on creating many many new jobs of good quality. Where you have more freedom. Trust but verified. That is a good idea there.
RG: What amazed me, is how important is mahaul in economy? How sentiment and trust is is more important in the economy. And one of the things I am finding in this Covid issue is that the real problem is the trust issue. People don’t quite understand what is going to happen next. There is fear in the system. You talked about unemployment. We had a big level of unemployment before this pandemic, and there will be massive unemployment after. How do you see this going to work in three or four months from now?
RR: The numbers are really worrying.If you look at CMIE, it says that virtually a hundred million more people have been put out of work as a result of this convid. 50 million through unemployment 60 million through leaving the labour force. Now, you can dispute what the particular survey does or say. But this is the only data we have. And the numbers are just mind boggling.I think that we have to open up in a measured way but as fast as possible.So that people start having jobs. If you don’t have the capacity to support people across the spectrum for too long and being a poor country, relatively poor country. People stuck out with significantly poor results. We see a lot of measures in the United States and Europe based on the kind of realities on the ground. The government in India has a different kind of reality that they are facing. What are the big differences in your view between the government of the west and anything with the reality of life in India?
RG: I mean the scale, first of all. The scale of the problem and its heart financial scale and inequality. The nature of Indian economy, things like caste inequality, the indian society is structured around inequality. This requires a lot of social change in India. And the problems are different in different states. The politics of Tamilnadu, the culture of Tamil Nadu, the language of Tamil Nadu are completely different from what is in Uttar Pradesh. Then you have to model things around them. One solution cannot work. So there is our government which is completely different than in the United States, there is an element of Control in our administration. Idea is all about control. It existed before British rule. The idea of governance in India is always about control. The corona disease cannot be controlled. This is what we are facing. The level of inequality you cannot see in the United States which is in India. Like caste system, which is the peak of inequality. You can see it in the situation like now, when the government is treating them differently in relief. How do you think of inequality, in the way the Indian government is treating the migrant population and the middle class?
RR: Indian is completely different at the bottom of the pyramid. To speak some ways of making their life situation better we need to think carefully. To reach everybody there, the success of the government can range from free education to health care but in terms of challenges it seems to me there is an administrative challenge. As the level of living is enhanced, the greatest challenge lies between the lower middle class and middle class. We need good qualities of job, so that the people are not dependent on the sarkari job and the comfort that comes with it. So this is something we need to work on, tremendous expansion and economic necessity. We had a decline in GDP when a lot of young people were entering the job force. You create the opportunity for any kind of area to flourish, that was the mistake we made in the past that this is the only way to grow. Most successful industry was the softwares and Outsourcing. Who would have thought that would be the India’s strength? Some people will even argue that it was because the government did not give any attention but we need to allow, allow the enterprise of the people to take its own place.
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